UK Commercial Property Insurance 2007 (Market Focus)

Table of Contents

• CHAPTER 1 MARKET CONTEXT
  • Introduction
  • The commercial property market suffered in 2006,continuing the trend from 2005
    • Premium income fell by 6.9 per cent in 2006
    • The commercial property underwriting result fell by 38.6per cent in 2005
    • Commercial property insurance performance ratiosdeteriorated in 2005
      • The claims ratio increased after a long run ofimprovements
      • The expense ratio increased by 4.1 percentage points in2005
      • The underwriting ratio also deteriorated in 2005 as boththe claims and expense ratios increased
  • Commercial property claims fell in 2006
    • Commercial property claims costs resulting from fire,business interruption and weather damage all fell in 2006
      • Commercial fire numbers fell in 2005
    • Weather claims costs declined in 2006
    • Business interruption claims costs, following fire andweather damage, fell in 2006
    • Theft claims costs increased due to higher average claimvalues in 2006
  • The industry remains concerned about future losses relatedto fire and flood as recent changes have heightened uncertainty in both
    • A fireworks blaze ended an otherwise quiet year for firerelated property claims
    • The future state of Britain' s flood defences have become asource of concern for insurers due to recent policy changes
    • Future risks are also seen as becoming more unpredictableas climate change alters rain and storm patterns
    • Fire regulation changes that came into effect in Oct 2006also decrease the ability of insurers to gauge risk accurately
    • Total losses have increased, with insurers noticing morelarge fire losses in 2006
• CHAPTER 2 THE FUTURE DECODED
  • Introduction
  • The commercial property insurance market experiencesstrong price competition, and moves into an underwriting loss in 2007
    • The commercial property insurance market is experiencingintense competition
    • Datamonitor forecasts that the commercial propertyinsurance market will reach £5.5 billion in GWP by 2011
    • The commercial property insurance market is forecast tomove into an underwriting loss in 2007
  • In the optimistic scenario, the UK commercial propertyinsurance market is forecast to reach £5.7 billion in GWP by 2011 ifprice competition is muted
    • The commercial property insurance market experiencesintense competition in 2006
    • Commercial property insurance GWP dips in 2007, followedby increases between 2008 and 2011
    • In the optimistic scenario, the commercial propertyinsurance market regains profitiability in 2009
  • In the pessimistic scenario, strong rate cutting in 2007leads the commercial property insurance market to record stronger losses
    • The commercial property insurance market experiencesintense competition in 2006 and in 2007
    • The commercial property insurance market sees a strongcontraction in 2007 followed by a period of growth between 2008 and 2011
    • Underwriting losses peak at £254 million in 2008
• CHAPTER 3 APPENDIX
  • Premium income measures
    • Earned premiums
    • Gross Premium
    • Net Premium
    • Written premiums
  • Current readings
  • Future readings
  • Do you need more information?
    • Datamonitor Financial Services Consulting
  • SPP writing team
• List of Tables
  • Table 1: Commercial property insurance GWP, 2001-2006e
  • Table 2: Commercial property insurance underwritingaccount, 2001-5
  • Table 3: Commercial property insurance claims, expenseand underwriting ratios, 2001-5
  • Table 4: Gross incurred commercial property claims byperil, 2002-6
  • Table 5: Number of UK fires, by location, 2001-5
  • Table 6: Commercial property insurance weather claimscosts, 2002-6
  • Table 7: Cost of business interruption claims by cause,2002-6
  • Table 8: Total cost of commercial property insurancetheft claims, 2002-6
  • Table 9: Number of commercial property theft claims,2002-6
  • Table 10: Average value of commercial property theftclaims, 2002-6
  • Table 11: Neutral scenario: Forecast GWP for thecommercial property insurance market, 2001-11f
  • Table 12: Neutral scenario: Forecast underwriting resultfor the commercial property insurance market, 2001-11f
  • Table 13: Optimistic scenario: Forecast GWP for thecommercial property insurance market, 2001-11f
  • Table 14: Optimistic scenario: Forecast underwritingresult for the commercial property insurance market, 2001-11f
  • Table 15: Pessimistic scenario: Forecast GWP for thecommercial property insurance market, 2001-11f
  • Table 16: Pessimistic scenario: Forecast underwritingresult for the commercial property insurance market, 2001-11f
• List of Figures
  • Figure 1: Commercial property insurance GWP contractedin 2005 and 2006
  • Figure 2: The commercial property insurance underwritingresult fell by over a third in 2005
  • Figure 3: Commercial property insurance claims andunderwriting ratios both deteriorated in 2005
  • Figure 4: Fire, business interruption and weather claimscosts relating to commercial property insurance fell in 2006
  • Figure 5: The number of commercial property fires fellin 2005
  • Figure 6: The cost of commercial property weather claimsdeclined in 2006
  • Figure 7: Business interruption claims costs fell in2006 following the lack of weather events
  • Figure 8: 2006 saw a drop in the number of commercialproperty theft claims but an increase in the average value of each claim
  • Figure 9: A fire decimated a fireworks factory in EastSussex in 2006
  • Figure 10: Key to the relative importance of forecastvariables
  • Figure 11: Neutral scenario key variables affectingcommercial property GWP, 2006e-11f
  • Figure 12: Neutral scenario: commercial propertyinsurance GWP declines in 2007 before increasing between 2008 and 2011
  • Figure 13: The commercial property insurance market isforecast to move into an underwriting loss in 2007 with losses peaking inthat year at £111 million
  • Figure 14: Optimistic scenario: key variables affectingcommercial property GWP, 2006e-11f
  • Figure 15: Commercial property insurance GWP reaches £5.7billion in GWP by 2011
  • Figure 16: The commercial property insurance marketmoves into an underwriting loss in 2007 before recovering profitability in2008
  • Figure 17: Pessimistic scenario: key variables affectingcommercial property GWP, 2006e-11f
  • Figure 18: Commercial property insurance GWP reaches £5.5billion in 2011
  • Figure 19: The commercial property insurance market isforecast to move into a loss in 2007 and for losses to peak at £254million in 2008